My Money Blog

Cut your budget by $100

A few months ago, I read an article about cutting your monthly budget by 10%. I'd link to it, but I can't seem to remember where I read it. Anyway, it didn't give many specifics or strategies, it just talked about how it would only take little changes to make this happen. I have looking at this for months, and I think this is crazy. 10% doesn't seem like that much, but when you have already been cutting just to get by, 10% seems impossible.

So, instead, we have decided to set a short-term goal of shrinking our monthly expenses by $100. Putting that extra money towards paying off debt would sure go a long way, and $100 seems like a much more manageable goal. Here are some ideas we have bounced around:

Bundle communication costs - television, phone, internet... Everywhere you turn someone is selling those as a package now, and I am starting to think it would be a good idea. I actually have been making phone calls and I considering this. All TV options seem to bring the same channels into your house, so why not go with the cheapest?

Find ways to cut electricity costs - Every little bit counts, even if you only knock off $10 or so a month. I talked about that a few weeks ago here.

Change your cell phone plan - Again, $10 here, $10 there, might add up to $100 at the end. Cut out the text messaging. I am not into text messages anyway. My cell phone bill is already pretty low, so this might now work for me.

Get your medicine at the grocery store pharmacy - I thought these stories selling $4 generic medicines, or free antibiotics were aimed at retired folks, but we got my daughter's antibiotic for free at Publix (a grocery store) a few weeks ago! That was pretty exciting, and saved us $10 or $15 over our normal co-pay. Why pay for something when someone else has it for free?

I am determined to lower our expenses by $100 per month - which is seeming more and more like an easily-attainable goal. I'll let you know how it turns out. If you have any thoughts or ideas, please share in the comment section.

Success!

Our first budget period ended yesterday, and it was a big success! We managed to stay within our limits for each category, and most important, did not swipe a credit card to pay for anything. We even ended up with an extra $150 that went unspent during the two weeks, which is a new thing for us. That $150 will go completely towards our debt snowball - which we are starting now.

We budgeted $120 towards groceries, and only used $110 - this was in large part due to good planning by my wife. For the first week of groceries, we only spent about $60, and saved $40 with store promotions, coupons, and competitor's coupons, so we were able to easily get everything we needed to get.

We started our next budget today, which this time around has to include our mortgage payment. We paid the majority of our monthly bills on the last pay cycle, so we are in pretty good shape. We should even have enough money to throw our daughter a nice birthday party (she is turning 3).

A nice side-effect of our budget success is that for the first time in a while, I feel good about our finances, and not the usual stress that comes with the monthly bills!

Our First Budget

A couple of weeks ago, my wife and I sat down to make our first real budget. Now, we've tried to stick to a budget before, but it was completely unrealistic, and we had no real goals in mind when working on it. The result was a meaningless piece of paper that we looked at on the first day of the month and never really looked at again.

You have to be completely committed to sticking to a budget, otherwise it will not work. Maybe this isn't true for everyone, but it is for us. Each night we talk about where we are in our budget: how much we have spent and how much we have left. We still have three days left on this budget period, and we have run out of money in certain categories, so we will not spend another penny. Here is how we came up with our budget.

First, we had to determine the time period for each budget. We get paid every two weeks, both on the same day. So each budget has to go for two weeks. This presents challenges because most bills occur monthly, and our pay comes at different times of the month each month. Some months we get paid twice, and occasionally, we get paid three times. I am sure in the months where get paid three times, we will save the extra money for the summer, or pay extra on our debts.

Next, we had to prioritize our bills and needs. We will not use credit cards to pay for anything anymore, so the total of our budget cannot exceed our pay. This was particularly challenging this time because our paychecks in the county we teach in are smaller for the first check. Here is what we came up with:

1. Necessities: Utilities, Water, Phone, Groceries (Food), housing
This are things we need to have and can't be sacrificed. We listed these first to make sure they were covered.

2. Mortgage Payment

3. Daycare
While this is not a life necessity, it is necessary for my wife and I to work.

4. Debt: Credit Cards, Car Payments, Student Loans, etc...
If you fall behind, the debts snowball. We make sure at least the minimum is always paid.

5. Savings
You may think it is odd that this is down this low - but it doesn't make sense to put money away while you are paying interest on your debts. My savings account might earn .5%, but I am paying 22.9% on a furniture loan. Right now, we are only saving for the holidays (so we don't have to charge gifts) and our emergency fund.

6. Luxuries: Cable, Cell Phone, Entertainment, etc...
These are nice but not necessary.

7. Other
This is where everything else goes. My daughter's birthday is coming up, so we added in a line item for gifts. The priority here will vary.

This is obviously not a concrete formula, just a nice starting place. Once we set our priorities, the budget wasn't too hard! We had to figure out which bills would be due soon that would be covered by this paycheck. This time, we are paying everything except our mortgage, which isn't due until after our next paycheck (so our next budget will be centered around our mortgage). We did have to make some sacrifices though...

We will not be eating out much anymore - it is easier to eat in anyway with two young kids. Plus we will save on gas.

We are going to try and stretch our gas so we don't spend as much on it - this might mean combining trips and doing more shopping online. That won't be so bad.

We are going to be clipping more coupons for groceries. We are also going to find ways to stretch our grocery dollars more (that is a topic for another day).

This seems easy enough. After trimming in some places, we even had a little left to pay extra on debt - which is going to be a priority for us until our debt is gone.

It turns out we should be able to cover all of our bills and expenses with our income - so the fact that have this much debt means we have been overspending for years. I wish we had taken our money more serious earlier on. We have about three days left on this budget, so I will post then and let you know how we did!